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What is the general verification procedures for liabilities?

      

What is the general verification procedures for liabilities?

  

Answers


Wilfred
•• Obtain or prepare a schedule for each class of liability. This should show the make-up of the liability i.e. the opening and closing balance and the changes.
•• The auditor should verify cut-off for example a trade creditor should not be included unless the goods were acquired before the year end.
•• Consider the reasonableness of the liability asking the question whether there may be circumstances which ought to excite suspicion.
•• Where there exists a system of internal controls covering that liability, determine, evaluate and compliance test the internal control procedures.
•• Consider the liabilities at the previous accounting date. Have they all been cleared
•• Terms and liabilities. This applies principally to loans. The auditor should determine that all terms and conditions agreed when accepting a loan have been complied with.
•• Authority: the authority for all liabilities should be sought. This will found in the company minutes on director’s minutes. Authority of the Articles of Association or Memorandum may be required.
•• Description: He should see the description that the account for each liability is adequate.
•• He should examine all the relevant documents.
•• The auditor should find out if there is security and he should ensure that it has been registered. The company’s Act requires that the nature of security, the item covered and aggregate amount of debt be disclosed.
•• The auditor must satisfy himself that appropriate accounting policies have been adopted and applied consistently.
Wilfykil answered the question on April 12, 2019 at 06:29


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